QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2012

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From To

Commission file number 1-14122

D.R. Horton, Inc.

(Exact name of registrant as specified in its charter)

Delaware

75-2386963

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

301 Commerce Street, Suite 500,

Fort Worth, Texas

76102

(Address of principal executive offices)

(Zip Code)

(817) 390-8200

(Registrants telephone number, including area code)

Not
Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨

(Do not check if a smaller reporting company)

Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

Common stock, $.01 par value  318,370,893 shares as of April 18, 2012

The accompanying unaudited, consolidated financial statements include the accounts of D.R. Horton, Inc. and all of its
wholly-owned, majority-owned and controlled subsidiaries (which are referred to as the Company, unless the context otherwise requires). All significant intercompany accounts, transactions and balances have been eliminated in consolidation. The
financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management,
all adjustments (consisting of normal, recurring accruals and the asset impairment charges, loss reserves and deferred tax asset valuation allowance discussed below) considered necessary for a fair presentation have been included. These financial
statements do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Companys annual
report on Form 10-K for the fiscal year ended September 30, 2011.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates.

Business

The Company is a national homebuilder that is engaged in the construction and sale of single-family housing in 25 states and 73 markets in the United States as of March 31, 2012. The Company designs,
builds and sells single-family detached homes on lots it develops and on finished lots purchased ready for home construction. To a lesser extent, the Company also builds and sells attached homes, such as town homes, duplexes, triplexes and
condominiums (including some mid-rise buildings), which share common walls and roofs. Periodically, the Company sells land and lots to other developers and homebuilders where it has excess land and lot positions. The Company also provides mortgage
financing and title agency services, primarily to its homebuilding customers. The Company generally does not retain or service originated mortgages; rather, it seeks to sell the mortgages and related servicing rights to third-party purchasers.

Seasonality

Historically, the homebuilding industry has experienced seasonal fluctuations; therefore, the operating results for the three and six-month periods ended March 31, 2012 are not necessarily indicative
of the results that may be expected for the fiscal year ending September 30, 2012 or subsequent periods.

The Company invests a portion of its cash on hand by purchasing marketable securities with maturities in excess of
three months. These securities are held in the custody of a single financial institution. The Company considers its investment portfolio to be available-for-sale. Accordingly, these investments are recorded at fair value. The investment portfolio
consisted of the following marketable securities at March 31, 2012 and September 30, 2011:

Of the $299.1 million in marketable securities at March 31, 2012, $178.3 million mature in the next twelve months
and $120.8 million mature in one to two years. Gains and losses realized upon the sale of marketable securities are determined by specific identification and are included in homebuilding other income. The Companys realized gains related to
these sales were $0.2 million during both the three and six months ended March 31, 2012, compared to $0 and $0.1 million, respectively, in the same periods of 2011.

At March 31, 2012, when the Company performed its quarterly inventory impairment analysis by reviewing the
performance and outlook for all of its communities, the assumptions utilized reflected the Companys expectation of continued challenging conditions and uncertainties in the homebuilding industry and in its markets. The Company evaluated
communities with a combined carrying value of $383.2 million for impairment.

The analysis of the majority of these
communities assumed that sales prices in future periods will be equal to or lower than current sales order prices in each community, or in comparable communities, in order to generate an acceptable absorption rate. For a minority of communities that
the Company does not intend to develop or operate in current market conditions, some increases over current sales prices were assumed. While it is difficult to determine a timeframe for a given community in the current market conditions, the
remaining lives of these communities were estimated to be in a range from six months to in excess of ten years. When a discounted cash flow analysis was prepared for a community, the Company utilized a range of discount rates of 12% to 14%. Through
this evaluation process, it was determined that communities with a carrying value of $0.9 million as of March 31, 2012 were impaired. As a result, during the three months ended March 31, 2012, impairment charges of $0.3 million were
recorded to reduce the carrying value of the impaired communities to their estimated fair value, as compared to $13.0 million of impairment charges in the same period of 2011. During the six months ended March 31, 2012 and 2011, impairment
charges totaled $0.8 million and $19.4 million, respectively.

The Companys estimate of undiscounted cash flows from
communities analyzed may change and could result in a future need to record impairment charges to adjust the carrying value of these assets to their estimated fair value. There are several factors which could lead to changes in the estimates of
undiscounted future cash flows for a given community. The most significant of these include pricing and incentive levels actually realized by the community, the rate at which the homes are sold and the costs incurred to develop the lots and
construct the homes. If conditions in the broader economy, homebuilding industry or specific markets in which the Company operates worsen, and as the Company re-evaluates specific community pricing and incentives, construction and development plans,
and its overall land sale strategies, it may be required to evaluate additional communities or re-evaluate previously impaired communities for potential impairment. These evaluations may result in additional impairment charges.

At March 31, 2012 and September 30, 2011, the Company had $26.4 million and $26.3 million, respectively, of land held for sale,
consisting of land held for development and land under development that met the criteria of land held for sale.

During the
three-month periods ended March 31, 2012 and 2011, the Company wrote off $0.5 million and $1.3 million, respectively, of earnest money deposits and pre-acquisition costs related to land option contracts which are not expected to be acquired.
During the six-month periods ended March 31, 2012 and 2011, the Company wrote off $1.4 million and $3.3 million, respectively, of these deposits and costs.

NOTE D  LAND AND LOT OPTION PURCHASE CONTRACTS

The Company enters into land and lot option purchase contracts to procure land or lots for the construction of homes.
Under these contracts, the Company will fund a stated deposit in consideration for the right, but not the obligation, to purchase land or lots at a future point in time with predetermined terms. Under the terms of the option purchase contracts, many
of the option deposits are not refundable at the Companys discretion.

Certain option purchase contracts result in the
creation of a variable interest in the entity holding the land parcel under option. The current guidance for determining which entity is the primary beneficiary is based on the ability of an entity to control both (1) the activities of a
variable interest entity that most significantly impact the entitys economic performance and (2) the obligation to absorb losses of the entity or the right to receive benefits from the entity. There were no variable interest entities
reported as land inventory not owned in the consolidated balance sheets at March 31, 2012 and September 30, 2011 because the Company determined it did not control the activities that most significantly impact the variable interest
entitys economic performance.

The maximum exposure to loss related to the Companys variable interest entities is
generally limited to the amounts of the Companys option deposits. At March 31, 2012 and September 30, 2011, the amounts of option deposits related to these contracts totaled $17.7 million and $13.2 million, respectively, and are
included in homebuilding other assets on the consolidated balance sheets.

NOTE E  NOTES PAYABLE

The Companys notes payable at their principal amounts, net of any unamortized discounts, consist of the
following:

September 30,

September 30,

March 31,2012

September 30,2011

(In millions)

Homebuilding:

Unsecured:

6.875% senior notes due 2013

$

171.7

$

171.7

6.125% senior notes due 2014, net

145.3

145.2

2% convertible senior notes due 2014, net

432.2

418.1

5.625% senior notes due 2014, net

137.6

137.5

5.25% senior notes due 2015, net

157.3

157.3

5.625% senior notes due 2016, net

169.5

169.5

6.5% senior notes due 2016, net

372.4

383.1

Other secured

6.9

5.7

$

1,592.9

$

1,588.1

Financial Services:

Mortgage repurchase facility, maturing 2013

$

163.8

$

116.5

Homebuilding:

On August 1, 2011, the Board of Directors authorized the repurchase of up to $500 million of the Companys debt securities effective through July 31, 2012. At March 31, 2012, $412.1
million of the authorization was remaining.

During the six months ended March 31, 2012, through unsolicited
transactions, the Company repurchased $10.8 million of its 6.5% senior notes due 2016 for an aggregate purchase price of $10.6 million, plus accrued interest. These transactions resulted in a gain on early retirement of debt of $0.1 million, net of
unamortized discounts and fees written off.

The indentures governing the Companys senior notes impose restrictions
on the creation of secured debt and liens. At March 31, 2012, the Company was in compliance with all of the limitations and restrictions that form a part of the public debt obligations.

Financial Services:

The Companys mortgage subsidiary, DHI Mortgage, has a mortgage repurchase facility that is accounted for as a secured financing. The mortgage repurchase facility provides financing and liquidity to
DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to the counterparties against the transfer of funds by the counterparties, thereby becoming purchased loans. DHI Mortgage then has the right and
obligation to repurchase the purchased loans upon their sale to third-party purchasers in the secondary market or within specified time frames from 45 to 120 days in accordance with the terms of the mortgage repurchase facility. In March 2012, the
mortgage repurchase facility was renewed and amended. The committed capacity of the facility remains at $180 million, but the capacity can be increased to $225 million. Increases in borrowing capacity in excess of $180 million are provided on an
uncommitted basis and at a higher borrowing cost than committed borrowings. Additionally, the term of the facility was extended to March 3, 2013.

As of March 31, 2012, $243.8 million of mortgage loans held for sale were pledged
under the mortgage repurchase facility. These mortgage loans had a collateral value of $230.4 million. DHI Mortgage has the option to fund a portion of its repurchase obligations in advance. As a result of advance paydowns totaling $66.6 million,
DHI Mortgage had an obligation of $163.8 million outstanding under the mortgage repurchase facility at March 31, 2012 at a 2.8% annual interest rate.

The mortgage repurchase facility is not guaranteed by either D.R. Horton, Inc. or any of the subsidiaries that guarantee the Companys homebuilding debt. The facility contains financial covenants as
to the mortgage subsidiarys minimum required tangible net worth, its maximum allowable ratio of debt to tangible net worth and its minimum required liquidity. At March 31, 2012, DHI Mortgage was in compliance with all of the conditions
and covenants of the mortgage repurchase facility.

NOTE F  HOMEBUILDING INTEREST

The Company capitalizes homebuilding interest to inventory during active development and construction. Capitalized
interest is charged to cost of sales as the related inventory is delivered to the buyer. Additionally, the Company writes off a portion of the capitalized interest related to communities for which inventory impairments are recorded. The
Companys inventory under active development and construction was lower than its debt level at March 31, 2012 and 2011; therefore, a portion of the interest incurred is reflected as interest expense.

The following table summarizes the Companys homebuilding interest costs incurred, capitalized, expensed as interest expense,
charged to cost of sales and written off during the three and six-month periods ended March 31, 2012 and 2011:

Three Months Ended

Six Months Ended

March 31,

March 31,

2012

2011

2012

2011

(In millions)

Capitalized interest, beginning of period

$

79.8

$

89.4

$

79.2

$

91.5

Interest incurred

28.1

33.8

56.1

69.1

Interest expensed:

Directly to interest expense

(5.5

)

(14.7

)

(12.5

)

(31.0

)

Amortized to cost of sales

(21.3

)

(19.5

)

(41.7

)

(40.4

)

Written off with inventory impairments



(0.4

)



(0.6

)

Capitalized interest, end of period

$

81.1

$

88.6

$

81.1

$

88.6

NOTE G  MORTGAGE LOANS

To manage the interest rate risk inherent in its mortgage operations, the Company hedges its risk using various
derivative instruments, which include forward sales of mortgage-backed securities (MBS), Eurodollar Futures Contracts (EDFC) and put options on both MBS and EDFC. Use of the term hedging instruments in the following discussion refers to
these securities collectively, or in any combination. The Company does not enter into or hold derivatives for trading or speculative purposes.

Mortgage Loans Held for Sale

Mortgage loans held for sale consist
primarily of single-family residential loans collateralized by the underlying property. At March 31, 2012, mortgage loans held for sale had an aggregate fair value of $297.3 million and an aggregate outstanding principal balance of $288.9
million. At September 30, 2011, mortgage loans held for sale had an aggregate fair value of $294.1 million and an aggregate outstanding principal balance of $284.6 million. During the six months ended March 31, 2012 and 2011, the Company
had net gains on sales of loans of $25.1 million and $19.7 million, respectively, which includes the effect of recording recourse expense, as discussed below in Other Mortgage Loans and Loss Reserves, of $2.7 million and $4.2 million,
respectively.

Approximately 74% of the mortgage loans sold by DHI Mortgage during the six months ended
March 31, 2012 were sold to one major financial institution pursuant to a loan purchase agreement. The Company has been negotiating with other institutions to establish additional loan purchase options. If the Company is unable to sell mortgage
loans to additional purchasers on attractive terms, the Companys ability to originate and sell mortgage loans at competitive prices could be limited which would negatively affect profitability.

Newly originated loans that have been closed but not committed to third-party purchasers are hedged to mitigate the risk of changes in
their fair value. Hedged loans are committed to third-party purchasers typically within three days after origination. The notional amounts of the hedging instruments used to hedge mortgage loans held for sale vary in relationship to the underlying
loan amounts, depending on the movements in the value of each hedging instrument relative to the value of the underlying mortgage loans. The fair value change related to the hedging instruments generally offsets the fair value change in the mortgage
loans held for sale, which for the three and six months ended March 31, 2012 and 2011 was not significant, and is recognized in current earnings. As of March 31, 2012, the Company had a notional amount of $73.6 million in mortgage loans
held for sale not committed to third-party purchasers and the notional amounts of the hedging instruments related to those loans totaled $73.5 million.

Other Mortgage Loans and Loss Reserves

Mortgage loans are sold with
limited recourse provisions which include industry-standard representations and warranties, primarily involving the absence of misrepresentations by the borrower or other parties, insurability if applicable and, depending on the agreement, may
include requiring a minimum number of payments to be made by the borrower. The Company generally does not retain any other continuing interest related to mortgage loans sold in the secondary market. Other mortgage loans generally consist of loans
repurchased due to these limited recourse obligations. Typically, these loans are impaired and often become real estate owned through the foreclosure process. At March 31, 2012 and September 30, 2011, the Companys total other
mortgage loans and real estate owned, before loss reserves were as follows:

September 30,

September 30,

March 31,2012

September 30,2011

(In millions)

Other mortgage loans

$

44.9

$

42.8

Real estate owned

1.3

0.9

$

46.2

$

43.7

Based on historical performance and current housing and credit market conditions, the Company has recorded reserves for
estimated losses on other mortgage loans, real estate owned and future loan repurchase obligations due to the limited recourse provisions, all of which are recorded as reductions of financial services revenue. The reserve balances at March 31,
2012 and September 30, 2011 were as follows:

September 30,

September 30,

March 31,2012

September 30,2011

(In millions)

Loss reserves related to:

Other mortgage loans

$

6.5

$

6.2

Real estate owned

0.4

0.4

Loan repurchase and settlement obligations  known and expected

24.2

26.4

$

31.1

$

33.0

Other mortgage loans and real estate owned and the related loss reserves are included in financial services other
assets, while loan repurchase obligations are included in financial services accounts payable and other liabilities in the accompanying consolidated balance sheets.

A subsidiary of the Company reinsured a portion of the private mortgage insurance
written on loans originated by DHI Mortgage in prior years. At March 31, 2012 and September 30, 2011, reserves for expected future losses under the reinsurance program totaled $2.0 million and $0.9 million, respectively, and are included
in financial services accounts payable and other liabilities in the accompanying consolidated balance sheets. It is possible that future losses may exceed the amount of reserves and, if so, additional charges will be required.

Loan Commitments and Related Derivatives

The Company is party to interest rate lock commitments (IRLCs) which are extended to borrowers who have applied for loan funding and meet defined credit and underwriting criteria. At March 31, 2012,
the notional amount of IRLCs, which are accounted for as derivative instruments recorded at fair value, totaled $211.8 million.

The Company manages interest rate risk related to its IRLCs through the use of best-efforts whole loan delivery commitments and hedging
instruments. These instruments are considered derivatives in an economic hedge and are accounted for at fair value with gains and losses recognized in current earnings. As of March 31, 2012, the Company had a notional amount of approximately
$14.5 million of best-efforts whole loan delivery commitments and a notional amount of $177.5 million of hedging instruments related to IRLCs not yet committed to purchasers.

NOTE H  FAIR VALUE MEASUREMENTS

Fair value measurements are used for the Companys marketable securities, mortgage loans held for sale, IRLCs and
other derivative instruments on a recurring basis, and are used for inventories, other mortgage loans and real estate owned on a nonrecurring basis, when events and circumstances indicate that the carrying value may not be recoverable. The fair
value hierarchy and its application to the Companys assets and liabilities, is as follows:



Level 1  Valuation is based on quoted prices in active markets for identical assets and liabilities. The Companys U.S. Treasury securities
are measured at fair value using Level 1 inputs.



Level 2  Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar
instruments in markets that are not active, or by model-based techniques in which all significant inputs are observable in the market. The Companys assets/liabilities measured at fair value using Level 2 inputs are as follows:



government agency securities, corporate debt securities, foreign government securities and certificates of deposit;



mortgage loans held for sale;



over-the-counter derivatives such as forward sales of MBS, put options on MBS and best-efforts and mandatory commitments; and



IRLCs.



Level 3  Valuation is derived from model-based techniques in which at least one significant input is unobservable and based on the Companys
own estimates about the assumptions that market participants would use to value the asset or liability. The Companys assets measured at fair value using Level 3 inputs, which are typically reported at the lower of carrying value or fair value
on a nonrecurring basis, are as follows:

The following tables summarize the Companys assets and liabilities at
March 31, 2012 and September 30, 2011 measured at fair value on a recurring basis:

Balance Sheet Location

Fair Value at March 31, 2012

Level 1

Level 2

Total

(In millions)

Homebuilding:

Marketable securities, available-for-sale

Marketable securities

$

41.0

$

258.1

$

299.1

Financial Services:

Mortgage loans held for sale (a)

Mortgage loans held for sale



297.3

297.3

Derivatives not designated as hedging instruments (b):

Interest rate lock commitments

Other assets



1.9

1.9

Forward sales of MBS

Other liabilities



(0.3

)

(0.3

)

Best-efforts and mandatory commitments

Other liabilities



(0.4

)

(0.4

)

Balance Sheet Location

Fair Value at September 30, 2011

Level 1

Level 2

Total

(In millions)

Homebuilding:

Marketable securities, available-for-sale

Marketable securities

$

16.3

$

281.3

$

297.6

Financial Services:

Mortgage loans held for sale (a)

Mortgage loans held for sale



294.1

294.1

Derivatives not designated as hedging instruments (b):

Interest rate lock commitments

Other assets



3.9

3.9

Forward sales of MBS

Other liabilities



(4.0

)

(4.0

)

Best-efforts and mandatory commitments

Other liabilities



(0.9

)

(0.9

)

(a)

Mortgage loans held for sale are reflected at fair value. Interest income earned on mortgage loans held for sale is based on contractual interest rates and included in
financial services interest and other income.

(b)

Fair value measurements of these derivatives represent changes in fair value since inception. These changes are reflected in the balance sheet and included in financial
services revenues on the consolidated statement of operations.

The following table summarizes the Companys assets at March 31, 2012 and September 30, 2011 measured at
fair value on a nonrecurring basis:

Fair Value atMarch 31, 2012

Fair Value atSeptember 30, 2011

Balance Sheet Location

Level 3

Level 3

(In millions)

Homebuilding:

Inventory held and used (a)

Inventories

$

0.6

$

26.9

Financial Services:

Other mortgage loans (a) (b)

Other assets

32.5

28.9

Real estate owned (a) (b)

Other assets

0.9

0.5

(a)

The fair values included in the table above represent only those assets whose carrying values were adjusted to fair value in the current quarter.

(b)

The fair values for other mortgage loans and real estate owned are determined based on the value of the underlying collateral.

The fair values of cash and cash equivalents approximate their carrying amounts due to
their short-term nature. The Company determines the fair values of its senior and convertible senior notes based on quoted market prices of recent transactions, which is classified as Level 2 within the fair value hierarchy. The aggregate fair value
of these notes at March 31, 2012 and September 30, 2011 was $1,880.3 million and $1,668.1 million, respectively, compared to an aggregate carrying value of $1,586.0 million and $1,582.4 million, respectively. The aggregate fair value of
the Companys senior notes includes fair values for the 2% convertible senior notes of $653.1 million and $511.9 million at March 31, 2012 and September 30, 2011, respectively, compared to their carrying values of $432.2 million and
$418.1 million, respectively. The carrying value of the equity component of the 2% convertible senior notes was $136.7 million at March 31, 2012 and September 30, 2011. For other secured notes and balances due under the mortgage repurchase
facility, the fair values approximate their carrying amounts due to their short maturity or floating interest rate terms, as applicable.

NOTE I  INCOME TAXES

The Companys income tax expense attributable to continuing operations for the three and six months ended
March 31, 2012 was $1.7 million and $3.2 million, respectively, compared to a benefit from income taxes of $58.6 million and $58.1 million in the same periods of the prior year. The income tax expense in the current year periods is due to
federal alternative minimum tax and state income taxes. The benefit from income taxes in the prior year periods was due to the Company receiving a favorable result from the Internal Revenue Service (IRS) on a ruling request concerning capitalization
of inventory costs, allowing the Company to reduce its unrecognized tax benefits and corresponding interest by $59.2 million. The Company does not have meaningful effective tax rates in these periods because its net deferred tax assets are offset
fully by a valuation allowance.

At March 31, 2012 and September 30, 2011, the Company had net deferred tax assets
of $816.4 million and $848.5 million, respectively, offset by valuation allowances of $816.4 million and $848.5 million, respectively. The realization of the deferred tax assets ultimately depends upon the existence of sufficient taxable income in
future periods. The Company continues to analyze both positive and negative evidence in determining the need for a valuation allowance with respect to its deferred tax assets. A significant part of the negative evidence the Company considers is its
three-year cumulative pre-tax loss position, which has declined from $445 million at September 30, 2011 to $209 million at March 31, 2012, and is largely the result of pre-tax losses incurred in fiscal 2009 as the Company was profitable in
fiscal 2010 and 2011. If the Companys current business trends continue, it expects to be out of the three-year cumulative pre-tax loss position before September 30, 2012. Other negative evidence supporting the need for a valuation
allowance that the Company considers in its analysis is the overall weakness in the economy and the housing market and tight mortgage lending standards. As the amount of negative evidence has declined over the past twelve months, a growing amount of
positive evidence has developed related to the Companys financial results. The Company has generated pre-tax income for four consecutive quarters totaling $134.2 million, and it generated more pre-tax income in the current quarter than in any
of the three previous quarters. The Company closed 4,240 homes and earned $42.3 million of pre-tax income during the three months ended March 31, 2012 and closed 8,358 homes and earned $71.5 million of pre-tax income during the six months ended
March 31, 2012. The value of the Companys net sales orders for the quarter and the value of the sales order backlog at March 31, 2012 increased 28% and 25%, respectively, compared to the prior year. Based on a sales order backlog of
6,189 homes at March 31, 2012 and the Companys current sales pace, the Company expects to close more homes in the second half of fiscal 2012 than in the first half, and expects to continue generating pre-tax income.

If homebuilding industry conditions and the Companys business remain stable and additional positive evidence develops, the Company
believes there could be sufficient positive evidence to support a conclusion that the Company will generate sufficient taxable income in future periods to realize its deferred tax asset, which would allow the Company to significantly reduce the
valuation allowance at some point during the next few quarters.

The accounting for deferred taxes is based upon estimates of
future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Companys consolidated results of operations or financial position.

The Company had income taxes receivable of $12.9 million and $12.4 million at
March 31, 2012 and September 30, 2011, respectively, that relates to a federal tax refund the Company expects to receive.

During the second quarter of 2012, after concluding its audit of the Companys fiscal year ended 2006 and 2007 tax returns, the IRS submitted its report to the U.S. Congressional Joint Committee on
Taxation (Committee). The Company expects the review and approval from the Committee will be completed during the current fiscal year at which time it will receive the $12.9 million income taxes receivable.

A reduction of $3.3 million in the amount of unrecognized tax benefits and accrued interest is reasonably possible within the current
fiscal year.

NOTE J  EARNINGS PER SHARE

The following table sets forth the numerators and denominators used in the computation of basic and diluted earnings
per share. Options to purchase 8.7 million and 9.5 million shares of common stock were excluded from the computation of diluted earnings per share for the fiscal 2012 and fiscal 2011 periods, respectively, because the exercise price was
greater than the average market price of the common shares and, therefore, their effect would have been antidilutive. Additionally, the convertible senior notes were excluded from the computation of diluted earnings per share for all periods because
their effect would have been antidilutive.

Three Months Ended

Six Months Ended

March 31,

March 31,

2012

2011

2012

2011

(In millions)

Numerator:

Net income

$

40.6

$

27.8

$

68.3

$

7.4

Denominator:

Denominator for basic earnings per shareweighted average common shares

317.6

319.3

317.0

319.2

Effect of dilutive securities:

Employee stock awards

2.5

0.6

1.3

0.3

Denominator for diluted earnings per share adjusted weighted average common shares

320.1

319.9

318.3

319.5

NOTE K  STOCKHOLDERS EQUITY

The Company has an automatically effective universal shelf registration statement filed with the SEC in September 2009,
registering debt and equity securities that it may issue from time to time in amounts to be determined.

On August 1,
2011, the Board of Directors authorized the repurchase of up to $100 million of the Companys common stock effective through July 31, 2012. All of the $100 million authorization was remaining at March 31, 2012.

During the three months ended March 31, 2012, the Board of Directors approved a quarterly cash dividend of $0.0375 per common share,
which was paid on February 21, 2012 to stockholders of record on February 10, 2012. In April 2012, the Board of Directors approved a quarterly cash dividend of $0.0375 per common share, payable on May 22, 2012 to stockholders of
record on May 8, 2012. Quarterly cash dividends of $0.0375 per common share were declared in the comparable quarters of fiscal 2011.

The Company typically provides its homebuyers with a ten-year limited warranty for major defects in structural elements such as framing components and foundation systems, a two-year limited warranty on
major mechanical systems, and a one-year limited warranty on other construction components. The Companys warranty liability is based upon historical warranty cost experience in each market in which it operates, and is adjusted as appropriate
to reflect qualitative risks associated with the types of homes built and the geographic areas in which they are built.

At
March 31, 2012, the Company had liabilities of $0.7 million for the remaining repair costs of homes which contain or are suspected to contain allegedly defective drywall manufactured in China (Chinese Drywall) that may be responsible for
accelerated corrosion of certain metals in the home. During the three months ended March 31, 2012, the Company received a payment of $2.4 million from a third-party for the reimbursement of costs paid to repair homes with Chinese Drywall and
recorded the reimbursement as a reduction of warranty expense, which is a component of home sales cost of sales. While the Company continues to seek additional reimbursements for these remediation costs from various sources, it has not recorded a
receivable for potential additional recoveries as of March 31, 2012.

The Company is named as a defendant in five Chinese
Drywall lawsuits filed in federal court, involving claims from fewer than ten of the Companys homeowners. These lawsuits are purported class action complaints involving hundreds of plaintiffs who are suing the homebuilders, suppliers,
installers, importers and manufacturers of the defective Chinese Drywall. The Company is also named as a defendant in a single plaintiff Chinese Drywall lawsuit pending in state court in Florida. At this time, the Company is unable to express an
opinion as to the amount of damages, if any, that could result from these lawsuits beyond what has been reserved for repair as discussed above.

Changes in the Companys warranty liability during the three and six-month periods ended March 31, 2012 and 2011 were as follows:

Three Months Ended

Six Months Ended

March 31,

March 31,

2012

2011

2012

2011

(In millions)

Warranty liability, beginning of period

$

46.0

$

41.2

$

46.2

$

46.2

Warranties issued

4.3

3.2

8.3

6.6

Changes in liability for pre-existing warranties

1.5

4.9

3.4

3.0

Settlements made

(2.9

)

(5.5

)

(9.0

)

(12.0

)

Warranty liability, end of period

$

48.9

$

43.8

$

48.9

$

43.8

Legal Claims and Insurance

The Company is named as a defendant in various claims, complaints and other legal actions in the ordinary course of business. At any point in time, the Company is managing several hundred individual
claims related to construction defect matters, personal injury claims, employment matters, land development issues and contract disputes. The Company has established reserves for these contingencies based on the estimated costs of pending claims and
the estimated costs of anticipated future claims related to previously closed homes. The estimated liabilities for these contingencies were $534.7 million and $529.6 million at March 31, 2012 and September 30, 2011, respectively, and are included in
homebuilding accrued expenses and other liabilities in the consolidated balance sheets. At March 31, 2012 and September 30, 2011, the vast majority of these reserves related to construction defect matters. Expenses related to the Companys
legal contingencies were approximately $20.8 million and $10.5 million in the six months ended March 31, 2012 and 2011, respectively.

The Companys reserves for construction defect claims include the estimated costs
of both known claims and anticipated future claims. As of March 31, 2012, no individual existing claim was material to the Companys financial statements, and the majority of the Companys total construction defect reserves consisted of
the estimated exposure to future claims on previously closed homes. The Company has closed a significant number of homes during recent years, and as a result the Company may be subject to future construction defect claims on these homes. Although
regulations vary from state to state, construction defect issues can generally be reported for up to ten years after the home has closed in many states in which the Company operates. Historical data and trends regarding the frequency of claims
incurred and the costs to resolve claims relative to the types of products and markets where the Company operates are used to estimate the construction defect liabilities for both existing and anticipated future claims. These estimates are subject
to ongoing revision as the circumstances of individual pending claims and historical data and trends change. Adjustments to estimated reserves are recorded in the accounting period in which the change in estimate occurs.

Related to the contingencies for construction defect claims and estimates of future construction defect claims on previously closed
homes, and other legal claims and lawsuits incurred in the ordinary course of business, the Company estimates and records insurance receivables for these matters under applicable insurance policies when recovery is probable. Additionally, the
Company may have the ability to recover a portion of its losses from its subcontractors and their insurance carriers when the Company has been named as an additional insured on their insurance policies. Estimates of the Companys insurance
receivables related to these matters totaled $217.4 million and $218.3 million at March 31, 2012 and September 30, 2011, respectively, and are included in homebuilding other assets in the consolidated balance sheets.

The estimation of losses related to these reserves is subject to a high degree of variability due to uncertainties such as trends in
construction defect claims relative to the Companys markets and the types of products built, claim frequency rates, claim settlement costs and patterns, insurance industry practices and legal interpretations, among others. Due to the high
degree of judgment required in establishing reserves for these contingencies, actual future costs could differ significantly from current estimated amounts and it is not possible for the Company to make a reasonable estimate of the possible loss or
range of loss in excess of its reserves.

Land and Lot Option Purchase Contracts

The Company enters into land and lot option purchase contracts in order to acquire land or lots for the construction of homes. At
March 31, 2012, the Company had total deposits of $20.1 million, consisting of cash deposits of $18.5 million and promissory notes and surety bonds of $1.6 million, to purchase land and lots with a total remaining purchase price of $1.2
billion. Within the land and lot option purchase contracts at March 31, 2012, there were a limited number of contracts, representing $11.1 million of remaining purchase price, subject to specific performance clauses which may require the
Company to purchase the land or lots upon the land sellers meeting their obligations. The majority of land and lots under contract are currently expected to be purchased within three years.

Other Commitments

To secure performance under various contracts, the Company had outstanding letters of credit of $38.9 million and surety bonds of $666.1 million at March 31, 2012. The Company has secured letter of
credit agreements that require it to deposit cash, in an amount approximating the balance of letters of credit outstanding, as collateral with the issuing banks. At March 31, 2012 and September 30, 2011, the amount of cash restricted for
this purpose totaled $39.0 million and $47.5 million, respectively, and is included in homebuilding restricted cash on the Companys consolidated balance sheets.

The Companys homebuilding accrued expenses and other liabilities were as follows:

00000000

00000000

March 31,2012

September 30,2011

(In millions)

Construction defect and other litigation liabilities

$

534.7

$

529.6

Employee compensation and related liabilities

89.0

85.8

Warranty liability

48.9

46.2

Accrued interest

25.0

25.3

Federal and state income tax liabilities

24.2

22.5

Other liabilities

99.3

120.4

$

821.1

$

829.8

NOTE N  RECENT ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs, which provides a consistent definition of fair value and ensures that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards
(IFRS). The guidance changes certain fair value measurement principles and expands the disclosure requirements particularly for Level 3 fair value measurements. The guidance is effective for the Company beginning January 1, 2012 and is to be
applied prospectively. The adoption of this guidance, which relates to disclosure, did not impact the Companys consolidated financial position, results of operations or cash flows.

In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, which requires entities
to disclose information about offsetting and related arrangements of financial instruments and derivative instruments. The guidance is effective for the Company beginning October 1, 2013 and is to be applied retrospectively. The adoption of
this guidance, which is related to disclosure only, is not expected to have a material impact on the Companys consolidated financial position, results of operations or cash flows.

The Companys 30 homebuilding operating divisions and its financial services operation are its operating segments.
The homebuilding operating segments are aggregated into six reporting segments and the financial services operating segment is its own reporting segment. The Companys reportable homebuilding segments are: East, Midwest, Southeast, South
Central, Southwest and West. These reporting segments have homebuilding operations located in the following states:

Homebuilding is the Companys core business, generating 98% and 97% of consolidated revenues during
the six months ended March 31, 2012 and 2011, respectively. The Companys homebuilding segments are primarily engaged in the acquisition and development of land and the construction and sale of residential homes on the land, in
25 states and 73 markets in the United States. The homebuilding segments generate most of their revenues from the sale of completed homes, and to a lesser extent from the sale of land and lots.

The Companys financial services segment provides mortgage financing and title agency services primarily to the Companys
homebuilding customers. The Company generally does not retain or service originated mortgages; rather, it seeks to sell the mortgages and related servicing rights to third-party purchasers. The financial services segment generates its revenues from
originating and selling mortgages and collecting fees for title insurance agency and closing services.

The accounting policies of the reporting segments are described throughout Note A
included in the Companys annual report on Form 10-K for the fiscal year ended September 30, 2011.

00000000

00000000

00000000

00000000

Three Months EndedMarch
31,

Six Months
EndedMarch 31,

2012

2011

2012

2011

(In millions)

Revenues

Homebuilding revenues:

East

$

133.6

$

93.5

$

252.4

$

194.3

Midwest

71.7

54.9

129.4

112.7

Southeast

213.2

141.8

410.0

290.6

South Central

259.8

228.1

526.5

457.9

Southwest

55.6

50.0

109.6

108.1

West

201.7

164.8

393.3

336.5

Total homebuilding revenues

935.6

733.1

1,821.2

1,500.1

Financial services revenues

25.6

18.0

46.6

39.2

Consolidated revenues

$

961.2

$

751.1

$

1,867.8

$

1,539.3

Inventory Impairments

East

$

0.1

$

1.9

$

0.2

$

1.9

Midwest









Southeast

0.2

4.1

0.6

4.7

South Central



0.2



0.2

Southwest







2.2

West



6.8



10.4

Total inventory impairments

$

0.3

$

13.0

$

0.8

$

19.4

Income (Loss) Before Income Taxes (1)

Homebuilding income (loss) before income taxes:

East

$

3.6

$

(8.1

)

$

6.2

$

(12.6

)

Midwest

(1.0

)

(8.5

)

(8.1

)

(13.2

)

Southeast

8.7

(11.9

)

15.5

(13.8

)

South Central

13.0

6.4

28.4

11.1

Southwest

2.6

1.1

4.7

(2.0

)

West

7.7

(11.4

)

13.0

(26.1

)

Total homebuilding income (loss) before income taxes

34.6

(32.4

)

59.7

(56.6

)

Financial services income before income taxes

7.7

1.6

11.8

5.9

Consolidated income (loss) before income taxes

$

42.3

$

(30.8

)

$

71.5

$

(50.7

)

(1)

Expenses maintained at the corporate level consist primarily of interest and property taxes, which are capitalized and amortized to cost of sales or expensed directly,
and the expenses related to operating the Companys corporate office. The amortization of capitalized interest and property taxes is allocated to each segment based on the segments revenue, while interest expense and those expenses
associated with the corporate office are allocated to each segment based on the segments inventory balances.

All of the Companys senior and convertible senior notes are fully and unconditionally guaranteed, on a joint and
several basis, by all of the Companys direct and indirect subsidiaries (collectively, Guarantor Subsidiaries), other than financial services subsidiaries and certain insignificant subsidiaries (collectively, Non-Guarantor Subsidiaries). Each
of the Guarantor Subsidiaries is wholly-owned. In lieu of providing separate financial statements for the Guarantor Subsidiaries, consolidating condensed financial statements are presented below. Separate financial statements and other disclosures
concerning the Guarantor Subsidiaries are not presented because management has determined that they are not material to investors.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial statements and related notes included in this quarterly report and with our annual report on Form 10-K for the fiscal year ended September 30, 2011. Some of the
information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could
cause or contribute to these differences include, but are not limited to, those described in the Forward-Looking Statements section following this discussion.

BUSINESS

We are one of the largest homebuilding companies in the United
States, constructing and selling homes through our operating divisions in 25 states and 73 markets as of March 31, 2012, primarily under the name of D.R. Horton, Americas Builder. Our homebuilding operations primarily include the
construction and sale of single-family homes with sales prices generally ranging from $90,000 to $600,000, with an average closing price of $217,100 during the six months ended March 31, 2012. Approximately 90% and 88% of home sales revenues
were generated from the sale of single-family detached homes in the six months ended March 31, 2012 and 2011, respectively. The remainder of home sales revenues were generated from the sale of attached homes, such as town homes, duplexes,
triplexes and condominiums (including some mid-rise buildings), which share common walls and roofs.

Through our financial
services operations, we provide mortgage financing and title agency services to homebuyers in many of our homebuilding markets. DHI Mortgage, our wholly-owned subsidiary, provides mortgage financing services primarily to our homebuilding customers.
We generally do not retain or service originated mortgages; rather, we seek to sell the mortgages and related servicing rights to third-party purchasers. DHI Mortgage originates loans in accordance with purchaser guidelines and historically has sold
most of its mortgage production within 30 days of origination. Our subsidiary title companies serve as title insurance agents by providing title insurance policies, examination and closing services, primarily to our homebuilding customers.

We conduct our homebuilding operations in the geographic regions, states and markets listed
below, and we conduct our mortgage and title operations in many of these markets. Our homebuilding operating divisions are aggregated into six reporting segments, also referred to as reporting regions, which comprise the markets below. Our financial
statements contain additional information regarding segment performance.

In our second quarter of 2012, we continued to see an improving sales trend as the number and value of our net sales orders increased 19% and 28% compared to the same period of fiscal 2011. Consistent
with fiscal 2011, we are seeing a demand pattern in our net sales during fiscal 2012 that is similar to the demand pattern we traditionally saw prior to the current housing downturn. The traditional demand pattern has the lowest net sales orders in
our first fiscal quarter, a sequential increase from the first quarter to the second quarter, a consistent level in the third quarter and then slowing net sales orders in the fourth quarter. Our net sales orders for the current quarter increased 55%
from the previous quarter, reflecting the expected seasonal increase as our spring selling season began. Our recent results and other national housing data suggest that the overall demand for new homes has slowly begun to improve, but we expect that
demand is likely to remain at low levels for some time, with uneven improvement across our operating markets.

In the three
and six months ended March 31, 2012, revenues from home sales increased 27% and 21% from the prior year periods and pre-tax income was $42.3 million and $71.5 million compared to pre-tax losses of $30.8 million and $50.7 million in the prior
year periods. Based on our sales order backlog of 6,189 homes at March 31, 2012 and our current sales pace, we expect to close more homes in the second half of fiscal 2012 than in the first half, and we expect to continue generating pre-tax
income. These results reflect our ability to operate profitably in a challenging environment through our strategy of investing capital to expand our operations, managing inventory levels efficiently, improving gross margins, and controlling SG&A
and interest costs effectively.

We believe we are well-positioned for an eventual housing recovery due to our strong balance
sheet and liquidity, which has allowed us to profitably grow our business recently despite the current overall slow growth in new home demand. We have continued to identify and invest in an increasing number of housing and land inventory
opportunities, and we will continue to adjust our business strategies as necessary based on housing demand in each of our markets. Nevertheless, our future results could be negatively impacted by prolonged weakness in the economy, continued high
levels of unemployment, a significant increase in mortgage interest rates or further tightening of mortgage lending standards.

While we are encouraged by recent modest improvement in new home demand, it remains difficult to predict if homebuilding industry conditions will continue to improve, remain stable or deteriorate from
current levels. We expect that conditions will be inconsistent across our operating markets in the near term. During the industry downturn, we generated significant cash flow from operations which we primarily used to increase our cash balances and
reduce our outstanding debt. Our liquidity and reduced leverage provide us flexibility to determine the appropriate operating strategy for each of our markets, and to increase our investments in housing and land inventory to expand our operations.
Our operating strategy includes the following initiatives:



Maintaining a strong cash balance and overall liquidity position.



Managing the sales prices and level of sales incentives on our homes to optimize the balance of sales volumes, profits, returns on inventory
investments and cash flows.

Renegotiating existing lot option contracts where necessary to reduce lot costs and to better match the scheduled lot purchases with new home demand in
each community.



Evaluating and selectively investing in land acquisition, land development and housing inventory opportunities to meet housing demand and expand our
operations in desirable markets.



Managing our inventory of homes under construction by selectively starting construction on unsold homes to capture new home demand, while monitoring
the number and aging of unsold homes and aggressively marketing unsold, completed homes in inventory.



Controlling the cost of goods purchased from both vendors and subcontractors.



Modifying product offerings and pricing to meet consumer demand in each of our markets.



Controlling our SG&A infrastructure to match production levels.

Although our operating strategy has produced positive results in recent quarters, we cannot provide any assurances that the initiatives
listed above will continue to be successful, and we may need to adjust components of our strategy to meet changing market conditions. If market conditions do not deteriorate from current levels, we expect that our operating strategy will allow us to
grow our profitability while maintaining a strong balance sheet and liquidity position in fiscal 2012 and into fiscal 2013.

Homebuilding SG&A expenses increased 3% to $127.5 million, but decreased as a percentage of homebuilding revenues by 320 basis points to 13.6%, as
we achieved improved leverage of these costs.



Interest expensed directly decreased 63%, to $5.5 million.



Interest amortized to cost of sales declined to 2.8% of total home and land/lot cost of sales, from 3.2%.



Homebuilding pre-tax income was $34.6 million, compared to a pre-tax loss of $32.4 million.



Homes in inventory were 11,100, compared to 10,500 at both September 30, 2011 and March 31, 2011.



Owned and optioned lots totaled 121,200, compared to 112,700 and 115,900 at September 30, 2011 and March 31, 2011, respectively.



Homebuilding debt was $1.6 billion at both March 31, 2012 and September 30, 2011, compared to $2.0 billion at March 31, 2011.



Net homebuilding debt to total capital was 18.9%, an increase of 90 basis points and 20 basis points from the ratios at September 30, 2011 and
March 31, 2011, respectively. Gross homebuilding debt to total capital was 37.1%, a reduction of 60 basis points and 580 basis points from the ratios at September 30, 2011 and March 31, 2011, respectively.



Homebuilding cash and marketable securities totaled $1.0 billion at March 31, 2012 and September 30, 2011, compared to $1.4 billion at
March 31, 2011.

Financial Services Operations:



Total financial services revenues, net of recourse and reinsurance expenses, increased 42% to $25.6 million from $18.0 million.

The following tables and related discussion set forth key operating and financial data for our homebuilding operations by reporting
segment as of and for the three and six months ended March 31, 2012 and 2011.

The value of net sales orders increased 28%, to $1,313.5 million (5,899 homes) for the three months ended March 31, 2012, from
$1,026.9 million (4,943 homes) for the same period of 2011. The value of net sales orders increased 23%, to $2,136.7 million (9,693 homes) for the six months ended March 31, 2012, from $1,732.6 million (8,306 homes) for the same period of 2011.
The number of net sales orders increased 19% and 17% during the three and six-month periods ended March 31, 2012, respectively, compared to the prior year periods reflecting an increase in sales demand for our homes. While we believe the
improvement in our sales as compared to the prior year reflects some modest improvement in new home demand and further stabilization of market conditions, overall demand for new homes remains at a low level.

In comparing the three and six-month periods ended March 31, 2012 to the same periods of 2011, the volume of net sales orders
increased in all six of our market regions. The largest percentage increases occurred in our Midwest, Southwest and Southeast regions as a result of improved market conditions, particularly in Chicago, Denver and Phoenix. Changes in the value of net
sales orders were generally due to the change in the number of homes sold in each respective region and, to a lesser extent, to increases in the average selling price of those homes, reflective of more stable market conditions. In our East
region, the increase in average selling price in the current quarter had a greater effect on the value of net sales than the change in the number of homes sold. Our future sales volumes will depend on the strength of the overall economy, employment
levels and our ability to successfully implement our operating strategies in each of our markets.

The average price of our
net sales orders in the three and six months ended March 31, 2012 was $222,700 and $220,400, respectively, notably higher than the averages of $207,700 and $208,600 in the comparable periods of 2011. The largest percentage increases were in our
Midwest and East regions and were primarily due to adjusting our product mix, with higher priced communities representing more of our sales. We continue to adjust our product mix, geographic mix and pricing within our homebuilding markets to respond
to market conditions.

Our sales order cancellation rates (cancelled sales orders divided by gross sales orders for the
period) during the three and six months ended March 31, 2012 were 22% and 23%, respectively, compared to 25% and 26% during the same periods of 2011. While our cancellation rates have improved recently, they remain slightly higher than they
were prior to the current housing downturn, and are mainly reflective of tight mortgage lending standards.